A five-year program was approved for the development of the tobacco production in Azerbaijan.

Under the state program for 2017-2021, approved by the presidential decree dated August 10, the tobacco industry will enjoy several privileges.

The document stipulates developing tobacco growing in the country, deepening the sphere of tobacco processing, ensuring the demand for raw materials of local processing enterprises operating in this area, increasing profitability and export potential, and increasing employment of the rural population.

Previously, President Ilham Aliyev signed a decree amending the decree on the state support for the development of tobacco cultivation in the country from October 5, 2016.

The changes introduced to the legislation imply issuing subsidies to those, selling tobacco to legal entities involved in tobacco refinery and individuals involved in entrepreneurship. It will comprise 0.05 manat ($0.02) per kilogram for dry tobacco and per 10 kilograms of raw tobacco.

The peak period of tobacco growing in the country was in 1978. Whereas in 1970 tobacco was grown only on 14,000 hectares, this figure reached 18,000 hectares in 1978. In 1990 it dropped to 14,000. Then the decline rate accelerated and tobacco was sown on just 1,000 hectares in 2014.

Gradually, the country managed to revive the sector, and in 2016 tobacco seed was sown on 2,400 hectares and in 2017 on 3,200 hectares.

The issue of developing the tobacco industry and challenges ahead were recently a topic of the republican conference in Gakh region, where President Ilham Aliyev stressed that a very serious program will be adopted to boost the tobacco industry.

President Aliyev, addressing the conference, called on to increase the production of cigarettes in Azerbaijan. “Over 10 billion cigarettes are consumed in Azerbaijan. Of these, only 1.6 billion are produced in Azerbaijan, i.e. 9 billion cigarettes are imported,” he said, mentioning that thus currency worth $150 million go abroad for the cigarette import.

“To supply the domestic market and, more importantly, obtain access to foreign markets, we must soon achieve the development of cigarette production in Azerbaijan. First of all, the domestic market should not depend on imports, so that the currency does not leave the country. After that we will also deal with exports,” he said

The President also expressed the necessity to increase the capacity of the existing cigarette factories.

“We do not have too many cigarette factories. I think we should also establish cigarette factories equipped with the latest technologies. There are countries where tobacco is not produced. Their climatic conditions are not suitable for this. However, there are several cigarette factories there. They buy raw tobacco from us, produce cigarettes and then sell them to us,” he said, adding it is a very profitable industry.

The head of state also ordered to double the acreage for the production of tobacco before 2021 increasing from the current 3,200 to about 6,000 hectares.

“Under such circumstances, if we take the average yield of two tons, then 12,000 tons of dry tobacco will be produced in Azerbaijan every year. This will bring great benefits to our country and our currency will not go abroad. In fact, we may have export opportunities,” he explained.

President Aliyev also pointed to harm of smoking, stressing that appropriate measures will be taken to ensure that the people of Azerbaijan gradually give up this habit.

Overall, the tobacco seed was sown only in three regions including Sheki, Zagatala and Gakh in 2015. Today, tobacco is sown in 13 regions on 3,200 hectares of land plots.

Member of the Parliamentary Committee on economic policy, industry and entrepreneurship Rufat Guliyev, commenting on the state program, stressed that the new state program will allow creating the lacking infrastructure and concretizing the development plan of this sphere.

“The sector is set to achieve the production of 12,000 tons of tobacco per year by 2021, which is quite a serious indicator that will allow us not only to provide the domestic market with tobacco products, but also to export tobacco abroad,” he said.

The state program takes into account all the necessary factors for the development of this industry, according to Guliyev.

“Today, domestic production provides only 16-17 percent of consumer demand, and the implementation of the state program will bring this figure to 60-65, and maybe up to 70 percent,” he told Trend.

The program also envisages establishment of mechanisms for insurance of the tobacco growing.

Insurance expert Khayal Mammadkhanli said that tobacco farming is one of the branches of agriculture, so the insurance conditions and contracts in this sphere will not differ much from the agreements on insurance of other crops.

“In Azerbaijan, there are insurance mechanisms for both annual and perennial crops. The main condition of the contract is that the insurance must occur during the validity period of the insurance contract,” he told Trend. “In agricultural insurance the contract is concluded after the germination of seeds and the appearance of sprouts, when the issue of obtaining a crop from the plant is beyond doubt. I think that this will also be applied to tobacco - at some point the sprouts will be inspected, after which the contract will be concluded.”

Touching upon the existing mechanisms of agricultural insurance in Azerbaijan, the expert noted that the insurance contract is an average of one year, with the exception of some cases, and the amount of insurance premium and insurance payments are calculated on the basis of the average yield indicator.